Opinion, Berkeley Blogs

Higher Education is Key for the Post-COVID-19 Economic Recovery

By John Aubrey Douglass

Lead Imagae

The US economy is in a free fall. Businesses have closed and people have been laid off. Unemployment could reach 30 percent in some parts of the country, and if it does there are predictions that an additional 15 percent of the population will fall into poverty. Inequality may grow with a significant impact on disadvantaged groups. And this comes at a time when the US economy is in the midst of a transition related to work.

When the economy was booming in September, there was already underway a dramatic shift in the structure of available jobs, with a growing need for training and education to match a changing labor market. As one Berkeley economist has noted, “The pandemic and subsequent recovery will accelerate the ongoing digitalization and automation of work—trends that have eroded middle-skill jobs while increasing high-skill jobs during the last two decades and contributed to the stagnation of median wages and rising income inequality.”

In California, a pre-virus study by the McKinsey Global Institute projected job growth through 2030 for health professionals, STEM fields, alternative energy, professional jobs in service fields including managers, and in education – fields requiring some higher education or graduate degrees. Before the realities of the pandemic, big declines were already predicted for office clerks, retail salespeople, farmworkers, cashiers, food workers, waiters, secretaries and administrative assistants.

What will the near- and long-term post-COVID-19 economy look like, including the transitional period to some form of the new normal? One conclusion seems reasonable: Americans will generally need greater access to higher education and vocational training programs, not less, even if it includes a more on-line, more socially distant experience.

Historically, when economies enter recessions bordering on depressions, the demand and need for higher education increases . There are many reasons to think this will again prove the rule.

Higher education is a generally highly productive path for redirecting large swaths of the unemployed, many of whom are in jobs that may not exist in the not so distant future, to upskill. Providing for accessible and affordable post-secondary education is also generally a better usage of tax dollars then simply paying for unemployment, particularly if the economy is in a long downward slide.

The question for the US, and states like California which represents the world’s 5th largest economy, is what forms of higher education, and which institutions, are needed to meet changing labor markets, and to promote socioeconomic mobility?

Another question: what will become of America’s internationally famed higher education system -- or really systems, since each state has its own version? In the aftermath of tremendous economic dislocation, and a feeble federal response to the financial need of states, what enrollment and program capacity in higher education will be left? Is there the political will to preserve the best and most capable parts of the system to help in the transition and to match the future of work? And if so, how to fund it?

At the moment, none of that is clear as people struggle with stay at home orders and unemployment claims shoot past 22 million. In the midst of dealing with the immediate term emergency, few are thinking of what will become an apparent need – to increase the educational and training skills of Americans. And this includes not only bachelor’s degrees and credentials and badges for specific skills or professions, but graduate training which is key to sustaining and expanding the “knowledge economy.”

For example, before the staggering spread of the virus, California already projected a need to dramatically increase the production of bachelor’s degrees. One pre-virus projection stated that California would need an additional 1.1 million people with bachelor’s degrees in order to meet the state’s labor needs by 2030.

At the same time, California, with the largest concentration of tech companies in the nation, has long depended on talent from throughout the world to come to its universities and work in the state – a pool that will likely shrink as global travel shrinks and the Trump administration plays politics with visas. One way to ramp up degree production is to develop fully and hybrid online programs to enroll a portion of the 2.4 million Californians with some college, but no degree.

The Impact of Covid-19

Make no mistake about it, the COVID-19 Virus will have a devastating impact on much of America’s higher education system. Without a major mitigation, like quickly discovering an effective therapeutic or vaccine, mass testing, and a new strategic infusion of federal and state dollars, the landscape of the nation’s colleges and universities may be forever changed.

Particularly at four-year institutions, enrollment means revenue. In the midst of the short-term economic and social shock of stay at home orders and the difficulties of containing the virus, there are estimates that universities and colleges will experience at least a 15 percent reduction in enrollment . Many students will likely decline to enroll in the fall and new students consider delaying their college educations – that is if they can actually have students on their campuses taking traditional or on-line courses.

The US is also the number one destination for international students. At public institutions, international students pay much higher fees than most domestic US students, generating irreplaceable income. For example, the University of California system of nine undergraduate campuses generates some $1.3 billion in tuition revenue from undergraduate international students; total tuition income, undergraduate and graduate, for UC is $5.2 billion .

But that market will shrink as students decide not to travel to the land with the most virus cases and deaths, and where immigrants are often vilified by the current president. Some estimate that US colleges and universities will see a 25 percent or more drop in the enrollment of international students in the fall. The largest number of international students come from China who may no longer be able to travel to the US. Surveys show that many of these students are concerned that once the come to the US they might not be able to return home to visit family or to enter the job market.

Almost all institutions are anticipating substantial losses in revenue. Tuition income will nose-dive. Some student are already demanding a discount in light of the severe economic recession, particularly if they find that continuing their education means taking fully on-line courses at the most expensive private four-year institutions. In the midst and shock of unemployment rates that, as noted, could reach north of 20 percent, higher education may also seem like a luxury for many, at least at first.

In the meantime, many smaller private institutions will likely close or need to merge. Many not-for-profit privates were already in financial trouble – some 30 percent were already running operating deficits . There are also demographic shifts in which the number of 18-year-olds is declining in many states.

No need to worry too much about the rich, elite privates, like Harvard. They have deep endowment pockets and they represent a very small percentage of institutions, and a very small percentage of the national enrollment. Some 75 percent of all students in the US are enrolled in public institutions – that is where the action is and where the attention should be largely focused. Indeed, out of some form of guilt, and public criticism, some uber-rich privates have returned the federal aid, notably Harvard and Stanford.

Some state campuses, most of which are part of larger public system, may also close or become satellites to the larger publics. I sense that a large portion of the for-profits, many that were already facing charges of poor quality, extremely high attrition rates, and exploiting students largely from lower income groups, will close as their primary purpose is to generate income to share-holders. Federal subsidies to these institutions, via federal Pell Grants and loan programs, and their low graduation rates, have driven much of the student debt problem.

At the same time, many public universities and 2-year community colleges will likely become more attractive alternatives for students who decide to attend locally and who are looking for lower costs than most of the not-for-profit and for-profit schools. But this will come at a time when most of the publics will be absorbing large scale declines in state funding. It would seem that the capacity of 2-year public colleges to enroll students in the short and long-term will decline exactly when the demand rises.

The Role of Higher Education in Recovery

One might confidently speculate that the short-term decline in enrollment will be followed by an increase in demand for higher education, depending on the response and flexibility of major public and private post-secondary institutions, and the amount, shape and structure of state and federal aid.

Sustaining and indeed enhancing the higher education teaching, research, and public service capacity of selected components of America’s higher education system would be an intelligent public policy response to this pandemic-induced economic decline. If it is not already obvious, investing more in academic research, often providing the building blocks for innovation, including in the health sciences, will be key for facing today’s and future challenges, including global pandemics and climate change.

Another practical reason to fund and sustain higher education is that in a number of states, including California, Iowa, and Maryland, universities are the largest employers. The University of California, with ten campuses, had a total budget of some $37 billion and alone represents California’s third largest employer.

Thus far, the federal emergency relief CARES Act provides only minimal funds for higher education – $14 billion to some 5,000 institutions largely based on the number of Pell Grant student they enroll, and split between direct student aid and funding for institutions to transition to on-line courses. It’s a token amount relative to need. To simply sustain campuses through the fall to minimize job cuts and deal with revenue losses, these institutions need over $50 billion , according to the American Council on Education.

Proposals are floating in Washington to include greater funding for state governments that could indirectly mitigate in some measure planned cuts to higher education, allowing lawmakers to funnel additional federal dollars to public campuses. But $50 billion is probably nowhere near enough to deal with the financial hit colleges and universities will face in the coming fiscal year. A more robust federal investment in higher education might include an institutional and student financial aid program greater in scale than the GI Bill passed during World War II.

Right now, every state, every public institution, and most businesses are looking for greater funding support from the federal government. It’s a complicated national emergency and no one really knows how deep the federal pockets can go and for what length of time it will take for the new normal to emerge.

Higher education institutions, and massive state systems like SUNY, the University of California, and the California State University, are only one among many constituencies in line asking for relief funding. Thus far, colleges and universities are not really on the radar in Washington and state capitals. What it will take is a recognition by state governors and lawmakers that higher education has an ongoing and crucial role to play for fostering socioeconomic mobility, innovation, and economic recovery.

But addition federal and state investment must also include a significant rethinking about the organization of state higher education systems, new ways to deliver educational services including greater usage on on-line platforms, and where the federal government and state governments should invest.

For now, it’s all hands on deck as campuses all across America, and indeed the world, attempt to deal with immediate issues like testing, if and how to open in the fall, and what role there should be for on-line education.

Soon, however, the long-term health and revised deliverables of higher education needs to emerge as a public policy debate.

Copyright 2020 John Aubrey Douglass, all rights reserved.


A shorter version of this article was published in University World News on April 26, 2020.

John Aubrey Douglass is a Senior Research Fellow - Public Policy and Higher Education at the Center for Studies in Higher Education - Goldman School of Public Policy - UC Berkeley. He is the author of The California Idea and American Higher Education (Stanford), The Conditions for Admissions (Stanford), The New Flagship University: Changing the Paradigm from Ranking to National Relevancy (Palgrave Macmillan) and Envisioning the Asian New Flagship University (Berkeley Public Policy Press), and is the Founding Principal Investigator of the Student Experience in the Research University (SERU) Consortium based at Berkeley.